For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
Nov. 5 — The government is emphasizing form over substance in rules allowing corporate reorganizations where only name or jurisdiction changes are made, officials said.
“The final rules really focus on form and there is a compromise there,” Krishna Vallabhaneni, deputy tax legislative counsel at the Treasury Department, said Nov. 5 at a District of Columbia Bar event.
The so-called F reorganization under tax code Section 368(a)(1)(F) allows corporations to transfer assets from one entity to another if all the assets, shareholders and tax attributes stay the same. The Internal Revenue Service issued final regulations (T.D. 9739) in September that outline six requirements for the transaction to be tax free (182 DTR G-6, 9/21/15).
“As with other types of reorganizations, if you choose your form carefully, you can get the results you're looking for,” Maury Passman, Branch 4 chief of the Office of Associate Chief Counsel (Corporate), said. “That kind of certainty helps facilitate tax administration from the government's perspective and helps taxpayers.”
The rules largely adopt the 1990 proposed rules, with some changes reflecting overlapping types of transactions. The rules also centralize guidance that had been spread out among various revenue rulings.
“The idea was to try to create certainty,” Vallabhaneni said. “Some cases the certainty says you just don't have an F anywhere.”
The goal of this project was to address F reorganizations, not necessarily other reorganization forms, Passman said. Answering additional questions would have delayed the project even longer, he said.
The final rules also stipulate that the F reorganization occurs in a “bubble,” so that events occurring before or after the transaction aren't taken into account.
‘Seinfeld' State of Mind
Because of the limited changes that happen during an F reorganization, some people at the IRS have dubbed these the “Seinfeld” rules after NBC's 1990s sitcom.
“I view F reorganizations in a sense as a kind of nothing,” Passman said. The transaction will be “taxed as if you hadn't swapped your shell. And swapping your shell won't cause tax implications either.”
To contact the reporter on this story: Laura Davison in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Brett Ferguson at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)